Inflation, war, and an AI sell-off... The market is at a crossroads... Chip stocks are down... Rotation is afoot... The sectors getting some new life... A plan to find winners amid the AI bull market's 'toughest test'...
For the second straight day, 'official' inflation numbers came in hot...
This morning's release of September's producer price index ("PPI") data showed wholesale inflation growing 6.3% year over year and 1.3% compared with the month prior.
Those were the highest numbers since 2022 and well above mainstream economists' consensus expectations of 5.5% annual growth and 0.6% monthly growth, respectively.
This tells us two things:
First, price increases are accelerating. PPI measures prices paid to producers (like what the farmer gets for wheat, or a trucking company gets for a haul), and it's seen as a leading indicator for the finished-goods prices measured by the consumer price index ("CPI").
As we reported yesterday, September's CPI numbers were already above estimates and showed 3.7% growth compared with the same month last year.
Second, a lot of economists are wrong. I (Corey McLaughlin) am reminded of when we wrote that British economists needed to "drink more" after a U.K. inflation report came in at double the forecast, mostly due to higher alcohol and tobacco prices.
This time, their U.S. peers are underestimating the effects of the war in Iran on inflation in the U.S. economy.
Meanwhile, the 'Iran war risk' is ramping up...
In the past few days, I've read reports that Iran is making moves to fortify its nuclear sites while the U.S. is considering using the "mother of all bombs" – which we haven't heard since the early days of the war.
This is all happening as President Donald Trump has laid out an apparent timeline for the war to end "immediately" or "right after" the U.S. midterm elections… fresh U.S. troops are bound for the Persian Gulf, as we wrote last week… and a container ship sank in the Strait of Hormuz after being hit with a projectile yesterday.
All signs point to more escalation and/or more energy supply disruptions.
On a related note, the war in Ukraine has become more intertwined with the war in Iran (and rising diesel prices), too.
As we wrote yesterday, the White House's diesel deal with Russia was practically a "nothing burger" when it comes to supply... but it's a much bigger story geopolitically.
Trump struck the diesel deal last Friday and declared an "energy ceasefire" between Russia and Ukraine on Sunday, pressing Kyiv to stop refinery strikes. When they didn't, Elon Musk's Starlink Internet service was throttled in Ukraine, and Musk said limits are "ultimately" the White House's call.
By this morning, service was partly restored... Ukrainian President Volodymyr Zelenskyy called the truce "done"... and Ukrainian drones hit Russia's Ryazan oil refinery.
Stansberry Venture Technology editor Dave Lashmet has been tracking the developments and sending us updates, ending this morning with this simple conclusion: "Starlink back. Refineries burning."
It's all inflationary one way or another, and we still don't expect the diesel deal to do anything productive.
And then there's AI...
Let's start with the good news...
The latest earnings from semiconductor-equipment maker ASML (ASML) and chipmaking giant Taiwan Semiconductor Manufacturing (TSM) show the chip sector is doing just fine.
Both of those companies have near monopolies in their industries. So they're great bellwethers of the chip sector. And the companies are showing no signs of slowing...
ASML – which makes the machines that companies use to "print" circuits on their chips – beat Wall Street's estimates for earnings, edged past sales forecasts, and raised the low end of its full-year revenue guidance for the third time this year.
Plus, it's already fully booked for both 2027 and 2028. And the company said that chipmakers are already asking to book orders in both 2029 and 2030.
Said another way, ASML's current capacity for these machines can't keep up with the demand that chipmakers need.
As for Taiwan Semiconductor – which controls more than 90% of all advanced chip manufacturing – it's firing on all cylinders. Net profit surged 69% year over year, and it reported record profits for the sixth quarter in a row.
Like ASML, TSM said that demand is outpacing supply. And it's ramping up capital expenditures to lift capacity. Signs point to more growth...
Still, the AI trade has cooled recently...
Now we get to what might be the biggest story in the market right now – the AI sell-off. For a second straight day, tech stocks were down... and it's hard to find a positive mainstream headline.
Sentiment has turned sour, sparked by questionable reports about OpenAI and Anthropic's financials ahead of would-be initial public offerings, which we touched on yesterday. Some of that is warranted, some maybe not.
Take CoreWeave (CRWV)... You can call it a "cloud-computing company," but it's more like a leveraged bet on the AI boom. It has seen its share price cut in half from its May 2026 highs. It's down about 27% since October 6 alone.
Longtime readers may recognize CoreWeave as one of the companies that credit-ratings agencies have flagged as showing warning signs during the AI-infrastructure build-out.
The company essentially rents out graphics-processing-unit ("GPU") power for AI. It owns and operates large clusters of Nvidia (NVDA) GPUs and rents access to that computing capacity to AI developers, large language model trainers, and other companies.
Most of its revenue comes from long-term commitments, and profits depend on the spread between what the GPUs cost and what customers pay to use them.
A slowdown in demand for AI would blow up CoreWeave's entire business. That's why our colleague Whitney Tilson has been warning about the company for almost all of this year, as he pointed out in his free daily e-letter today...
I said the first stocks to collapse will likely be the smaller companies with insane valuations whose entire businesses (and stock prices) are dependent on AI – like CoreWeave.
And now, CoreWeave is "imploding," Whitney wrote. Read his full issue here.
That said, not everyone agrees. Two of our analysts, Alan Gula and Gabe Marshank, debated CoreWeave's outlook at our annual Stansberry Research conference. Alan was bullish while Gabe, like Whitney, is bearish. You can now watch that full debate here.
In the meantime, the ratings agencies have a junk rating on CoreWeave's debt. That means it has to pay higher interest rates, and that's becoming a self-fulfilling prophecy...
As the rate rises, investors panic-sell on fears that CoreWeave (which reported a loss of about $1.2 billion last year on $5 billion in revenues) won't be able to pay back its debt. And that pushes the rate even higher. Yesterday, the interest rate on CoreWeave's debt surged above 15%.
CoreWeave is just one company. And with a market cap of $38 billion, it's far from the largest company in the AI space. But because of the circular nature of the AI build-out, it has become an important piece of the puzzle...
CoreWeave has deals with OpenAI, Microsoft (MSFT), and even Intel (INTC). And Nvidia doesn't just have a deal to supply CoreWeave with chips... It has an 11% stake in the company.
So CoreWeave's problems can quickly become AI-sector-wide problems. That's something we're going to keep an eye on... because, until recently, AI stocks were the ones keeping the rest of the market afloat. Now, that relationship has flipped.
Rotation, rotation...
Two weeks ago, we wrote that the strength of semiconductor stocks – which have been beneficiaries of the AI boom – was hiding the "stealth bear market" going on in the rest of the stock market.
At the time, the iShares Semiconductor Fund (SOXX) had been outperforming the average S&P 500 stock by about 20 percentage points over the previous month.
SOXX hit a recent high just one trading day after that. But ever since, the sector has caught up to the rest of the market. Since that recent high on October 5, SOXX is down more than 15% – entering a technical correction.
That's weighing on the rest of the market, despite market breadth getting stronger lately. That's right – while popular AI names are selling off, other parts of the market are going up. It's a sign of market rotation, which is a healthy thing...
The benchmark S&P 500 Index is down about 0.5%, while the Nasdaq Composite Index is down more than 2% since this time last week. But over the same period, the equal-weight S&P 500 is up more than 1%.
Today, more than 370 of the S&P 500 companies were higher, and roughly three-fourths of the small-cap Russell 2000 companies were in the green.
The healthcare sector was up substantially (almost 2%) for a second straight day and is breaking out to new highs. Seven other S&P 500 sectors were also higher, including real estate – which we just wrote about on Tuesday as an area of opportunity, one that our Dr. David "Doc" Eifrig just put a trade on in Retirement Trader.
In short, these are the places to look while AI names head south and the market is at a crossroads.
The AI Crisis Event...
Today, Marc Chaikin and Joe Austin over at our corporate affiliate Chaikin Analytics debuted their AI Crisis Event.
Marc and Joe have decades of Wall Street experience, including during the dot-com boom and bust. And they're warning that today looks similar to back then... and that the AI-driven bull market is about to face its most dangerous test yet.
As we've written before, eye-popping spending from the "hyperscalers" has carried the market to this point, but companies like Meta Platforms (META), Microsoft, Amazon (AMZN), and Alphabet (GOOGL) are taking on more debt to finance growth... and Wall Street is demanding to see returns.
At the same time, sour sentiment about data centers around the country threatens to slow down the whole AI boom, and inflation keeps on rising.
As Marc said this morning, this combination of factors is his "top concern" for the markets...
There's no doubt the amount of debt these AI companies are accumulating is very concerning, especially with no real timeline for when they'll be able to pay it back. And there's no denying the public has done a massive 180 on support for data centers. They've become public enemy No. 1. So this very well could be the thing that deals the final blow to the AI bull market.
Joe and I both worked on Wall Street during the dot-com crash, and the same things that triggered that crash are prevalent today: Extreme speculation, lack of profits for most of the companies in the space, cash running out, and now you have the threat of rising interest rates.
The market could "turn on a dime," Joe added, and the "house of cards" that is the AI infrastructure build-out could unravel quickly "if dozens if not hundreds of additional data centers" aren't built.
A solution for these uncertain times...
Marc and Joe call them "crisis-resistant companies." These are businesses that produce "real cash" on a repeated basis. They can hand you returns in bull or bear markets. And Marc and Joe have developed a "double bullish" signal that can identify them.
For example, with this signal you could have made as much as 670% owning shares of Camping World (CWH) during the COVID-19 pandemic. It flashed a "double bullish" signal in March 2020 – the same month as a brief bear market – and the stock spent 18 months climbing as people sought activities that took them outdoors.
During the bear market of 2022, the same strategy would have turned folks on to Axon Enterprise (AXON), which was then mostly known as a company that made tasers for law enforcement agencies, but it was developing AI tools that turned body-cam footage into incident reports, saving officers many hours of time.
The stock rose around 480% in the roughly two years after Marc and Joe's "double bullish" signal would have flashed during a period that was tough for tech stocks. As Joe said, this is an example of "hidden innovators in a world dominated by Big Tech."
Companies like these are "safe harbors that could also double or triple your money," Marc says.
Click here to watch a replay of Marc and Joe's free AI Crisis Event right now. You'll learn Marc and Joe's outlook on AI... information and how to access more of their recommendations... hear their favorite stock to buy right now... and one to avoid at all costs.
New 52-week highs (as of 10/14/26): AbbVie (ABBV), BP (BP), Chevron (CVX), EOG Resources (EOG), Exelixis (EXEL), Kimbell Royalty Partners (KRP), Marathon Petroleum (MPC), Pfizer (PFE), Philip Morris International (PM), Valero Energy (VLO), State Street Energy Select Sector SPDR Fund (XLE), and ExxonMobil (XOM).
In today's mail, feedback on the Federal Reserve and interest rates, inflation, and diesel, which we covered in yesterday's Digest... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"If anyone believes that Warsh and the Fed will dare to raise interest rates two weeks before the midterms, I have a nice red bridge to sell them really cheaply (prepayment required, LOL). They will raise in December.
"BTW anyone who believes that real inflation is around 3%+ has not done any shopping nor has eaten out in a restaurant lately.
"Finally, even IF Putin will do what he promised (he will not; he is a habitual liar) that Diesel will not reach the US in time to make any perceptible difference in Diesel prices at the pump before the midterms. This is all a kabuki theater." – Subscriber Thomas S.
All the best,
Corey McLaughlin with Nick Koziol
Baltimore, Maryland
October 15, 2026
